Under pressure to tighten supply chain, drug companies look to blockchain

June 8, 2018

Under federal pressure to tighten the pharmaceutical supply chain and keep drugs from falling into the wrong hands, drug companies are ramping up experiments with promising but unproven blockchain technologies.

AmerisourceBergen Corp. and Merck & Co. Inc. plan to expand a test project completed last year that tracked the ownership of drugs moving through the health-care supply chain. The new test will increase the number of drugs and health-care devices and perform more complex transactions, said Dale Danilewitz, chief information officer at the drug distributor.

Specifically, Amerisource wants to streamline the verification of drugs that a retailer or hospital returns to the company, Mr. Danilewitz told CIO Journal. Some returns can be resold if their history can be verified.

A scan that resulted in negative authentication. The data elements couldn’t be found in the blockchain which indicates a counterfeit product. In addition, the app renders the geo-locations of all scans, indicating that probably a lot of copies of this package with the same data exist and have been scanned multiple times around the world.

“We’re making sure of the provenance of the product, guaranteeing it hasn’t been tampered with all the way through the chain to the patient,” he said. “Blockchain is such a natural fit for that kind of capability.”

The tests come as the pharmaceutical industry faces pressure to meet new regulations that go into effect starting in 2019 and intended to protect consumers from fake, contaminated and stolen medications. The Drug Supply Chain Security Act, enacted in 2013 by the Food and Drug Administration, calls for an electronic system to track and trace certain prescription drugs in the U.S. as they move from manufacturers to distributors, health-care providers, retailers and patients. Specific regulations phase in over 10 years.

Blockchain, the distributed ledger technology best known as the record-keeping system behind cryptocurrencies, looks promising to drug companies as a neutral ground to share data that would help them comply with the regulations. The idea is that by uploading data about a health-care device or a given batch of pills onto a blockchain, participants can track the products as they are bought, sold or otherwise moved between manufacturers, distributors, doctors and pharmacies.

Today, there is no single database or system that industry participants share that contains such information, said Heather Zenk, senior vice president of strategic global sourcing at Amerisource. Individual companies keep their own databases and may share information with select partners. But no neutral data exchange exists.

About 16 million units of pharmaceutical products are resold by Amerisource per year, accounting for about $3 billion in sales, Mr. Danilewitz said. That is a small portion of the $153.1 billion in revenue the company reported in 2017. The relatively small scale of the business makes it a good candidate for blockchain tests, he said.

A pharmacy might receive more products than it ordered, or a hospital decides to use a different drug, he said. Serial numbers on vials and blister packs can be verified with data stored on the blockchain. Paper and other electronic records about the product as it traveled through the supply chain can be matched against the blockchain’s information, he said, giving the company a more complete view of the journey than current processes. “Right now, once it leaves our distribution center, we have no guarantee no one has tampered with it when we get it back.”

Amerisource, a longtime SAP SE customer that uses the company’s blockchain products, also is testing Hyperledger blockchain for similar traceability.

That test is happening with competitor McKesson Corp., drug maker Pfizer Inc., and others in a nonprofit group, called MediLedger, formed in 2017.

To keep each company’s sensitive data protected, additional layers of protection are needed, Ms. Zenk said. That includes extra encryption to disguise sensitive data and coding safeguards during the writing of so-called smart contracts.

“Blockchain could meet our challenges but out of the box, it doesn’t,” she said.

WSJ article

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